Proceeds of crime are essential to money-laundering allegations; proceedings failed when the underlying transaction lacked that character.

Money-laundering allegations require property derived or obtained from criminal activity relating to a scheduled offence. Where the entity from which the petitioners allegedly received tainted funds was finally discharged in both scheduled-offence and PMLA proceedings on an unchallenged finding that the transaction did not involve proceeds of crime, the foundational element of money laundering was absent. The notes state that proceedings against the petitioners, including orders issuing process and refusing discharge, were quashed because their allegations arose solely from that transaction.

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Issues: Whether money-laundering proceedings against the petitioners could continue when the entity from which they were alleged to have received tainted funds had been finally discharged on the finding that the transaction did not involve proceeds of crime.

Analysis: The allegations against the petitioners arose solely from their transactions with the said entity. That entity stood discharged in both the scheduled-offence and PMLA proceedings, under unchallenged orders which found that the money forming the subject of the transaction was not proceeds of crime. Under Section 2(1)(u) read with Section 3, property must have been derived or obtained from criminal activity relating to a scheduled offence before an offence of money laundering can arise. In the absence of proceeds of crime linked to the transaction, the foundational ingredient for the alleged offence was absent.

Conclusion: The PMLA proceedings and the orders issuing process and refusing discharge were quashed qua the petitioners, in favour of the petitioners.

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